August 4, 2025 • 31 mins
- Ed Yardeni, Chief Investment Strategist and founder at Yardeni Research
- Michelle Meyer, Chief Economist at the Mastercard Economics Institute
- Lynn Martin, President at NYSE
- Bill Dudley, Bloomberg Opinion columnist and former NY Fed President
Ed Yardeni, Chief Investment Strategist and founder at Yardeni Research, discusses the outlook for the equity rally after President Trump's tariff deadline and his firing of the head of the Bureau of Labor Statistics. Michelle Meyer, Chief Economist at the Mastercard Economics Institute, talks about the outlook for the US consumer, consumer spending, and the US economy. Lynn Martin, President at NYSE, discusses the outlook for IPOs, regulation, and crypto products. Bill Dudley, Bloomberg Opinion columnist and former NY Fed President, discusses his Opinion column on how the Fed is currently under siege and why he believes it will come out OK.
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Speaker 1 (00:00):
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Speaker 2 (00:11):
This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
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Speaker 1 (00:36):
We'll begin this.
Speaker 3 (00:36):
Hour with stocks looking to bounce back after a week
payrolls report, fueled rate cut expectations and your d any
of your Danny research writing. Traders might be starting to
take profits before going on their August vacations. They may
also be betting that September could be a week month
for stocks.
Speaker 1 (00:52):
Ed joins us now, and let's start.
Speaker 3 (00:54):
With the growth picture and just your reaction to Friday's
labor market data, especially those massive downwards revisions. For you
right now, is it a cause of concern?
Speaker 4 (01:04):
Not?
Speaker 5 (01:05):
Really? Not the way the market took a dive, and
I'm happy to see that the market may very well
rebound today. The reality is we did have a lot
of uncertainty during May and June when we had these
big downward revisions. Honestly, it seems to me the downward
revisions actually make more sense given that if I was
(01:25):
an employer during May and June, I wouldn't have fired anybody.
But I wouldn't have hired anybody given all the uncertaintly
unleashed by what I call Trump's tariff turmoil. And so yeah,
all in all, those numbers didn't surprise me all that much,
with the benefit of hindsight obviously. And then of course
(01:46):
we did see that the labor supply, the labor force
has been kind of flatted down since the beginning of
the year. So this is a combination of weakness in
May related that may be temporarily related to the turmoil
on tariffs that should I think be abait over the
(02:08):
next few months. And at the same time we may
actually have a shortage of workers.
Speaker 3 (02:12):
Well, the President didn't like the jobs number on Friday,
and he fired the head of the Bureau of Labor Statistics.
Do you think that undercuts market confidence?
Speaker 5 (02:22):
Well, this is a very bad situation. The President in
my opinion, shouldn't have done that. I agree with what
your collie Danny just said, and that is he should
be throwing more money at the Bureau of Labor Statistics
that he can do a better job settling workers and
(02:43):
the unemployed to see what's really going on here. Firing
the commissioner it does raise some questions of the confidence
that people are going to have in the data, especially
if he puts in a loyalist as a statistician, which
he's likely to do.
Speaker 6 (02:59):
So what do you do then, ed, if you get
a loyalist put in as a top statistician there, do
we still trade on the data? Do you take it
more skeptically? Do you use private measures more? How will
it change how you interpret labor market data?
Speaker 5 (03:11):
Well? Yeah, I think right now there's a lot of
skepticism about the labor market data, the employment data, I
should say, because of what you mentioned before the fact
that response rates have gone down, and look, the economy
moves a lot faster these days, and I'm not sure
(03:32):
the statistical techniques that the BLS has move is rapidly.
So I would throw more money at him rather than
become partisan partisan about it. So all I'm saying is
that data was already suspect for other reasons. And we've all,
all of us economist types have looked at all the
employment data, both private and public. So I think nothing
(03:58):
dramatically changes in terms of the way the markets look
at data.
Speaker 6 (04:02):
Even so ed nothing dramatically changes. But Friday did demonstrate
a vulnerability in the market with that huge move in
the front end. You could even see what happened with
copper prices demonstrated a vulnerability.
Speaker 1 (04:13):
Given that we've had.
Speaker 6 (04:14):
This slow melt up to the summer, you're still bullish ed,
But are you concerned about some of these short term
blips that traders aren't properly hedged for.
Speaker 5 (04:23):
Well, you quoted me saying that a lot of traders,
a lot of investors are going on vacation. They certainly
don't want to be exposed to the volatility of the market,
at least not from a trading perspective. So I think
we're going to see a lot of that kind of
activity slow down. I think it already has slowed down.
Maybe it started that on Fridays. Some people said, you
(04:44):
know what I'm going to take. I'll be taking vacation
for the next week, two weeks. Let me just close
my books here. And then, of course there is a
seasonality issue. Septembers have a tendency to be a week months,
so I would miss prize if this market just kind
of chops around here in August and September, and maybe
(05:05):
we make some sort of low or bottom in October
for a year end rally.
Speaker 3 (05:11):
Good luck to anyone who's trying to take a vacation
with all these headlines coming out, and also this week
we have this new deadline when it comes to the
tariff rates on Thursday. Do you think the market is
ready to basically put the trade war behind them?
Speaker 5 (05:24):
I think the markets would love to put the trade
war behind them, and I really thought that by now
the President would really be sort of in the same camp,
because he's going to start focusing on the midterm elections
next year. He does love to talk at these large conventions,
these large rallies in sports stadiums, and he's going to
(05:47):
need to do that in order to shore up his
Republican Party during the midterm elections. And he's going to
really start to focus on just saying what has been
accomplished and avoid doing things that might backfire on the midterms.
So yeah, I think the other issue, of course, is
(06:08):
the courts are probably about to rule it. He doesn't
really have the legal authority to do what he's been doing.
I don't know if it's going to go all the
way up to the Supreme Court. The Appeals Court has
a love in judges, and if all I loved of
him rule that way, which is possible, the Supreme Court
may not take it up. So we may be entering
even a more volatile period with regards to what's going
(06:30):
on here on the tariff side.
Speaker 3 (06:31):
But you don't expect the terrors to go away, do you,
Because there are other tools they can use to enact them.
Speaker 5 (06:37):
There are other tools, but they're not as quick or
efficient as the Emergency Act that he called upon. That
the courts may rule he just doesn't have the power
to declare an emergency when there doesn't seem to be
an emergency. But again, I think he and the administration
(06:59):
may conclude that it's time to downplay the whole thing
and move on.
Speaker 6 (07:04):
What does that mean for corporate America ed Some of
these companies are just starting to wrap their heads around
what it needs for them, or you have the legend
of Amazon last week, who said, we just don't know
what's going to happen moving forward. Is there enough clarity
after Friday for corporations to move forward with things like
spending and hiring plans.
Speaker 5 (07:21):
I think we have to see what the courts rule
and how the administration responds to that. The reality is,
if we just take it at face value that the
President wants to basically achieve a fifteen percent tariff across
the board on everybody and raise something like four or
five hundred billion dollars, well, the corporate income tax raises
(07:42):
about six hundred billion dollars. In effect, the tariffs are
attack and there are direct tax on importers businesses, and
so it is a negative for corporate profitability. And again
we've heard some bad news out of GM and Ford
anticipate this, but other companies said, we just don't know
enough to really figure out what this is going to
(08:05):
cost us. So that's still a known unknown.
Speaker 3 (08:08):
But still a little bit more clarity in terms of
the bottom line rate for tariffs. We do have a
weakening jobs report on Friday. Do you think the Fed
is in position to cut in September?
Speaker 5 (08:19):
Well, the market certainly thought so on Friday, maybe today
there'll be a change of opinion. I think on Friday
we got the probability of a rate cut according to
the CME Fedwatch tracking tool, going up to a ninety
percent probability. Then over the weekend that you know, that
(08:42):
actually simmer down by the end of Friday down to
eighty percent. I wouldn't be surprised if there is no
rate cut on September because we still have a batch
of data up ahead here, particularly on the inflation front.
We are seeing that the tariffs are having an impact
on inflation. A lot of people saying, well, it's not there,
(09:03):
but the reality is, if you look at durable goods inflation,
durable goods prices typically fall. That's what they did before
the pandemic. Then they had that inflation spike, but then
they came right back and started falling again, and now
they're rising again, mostly because of the tariffs.
Speaker 3 (09:21):
ED thanks so much for your time this morning, to
great point at your Denny of your Denny research. IPOs
are making a comeback this summer, with the latest FIGMA
share surging more than two hundred and fifty percent in
(09:42):
its debut last week.
Speaker 1 (09:44):
So excited for this conversation.
Speaker 3 (09:45):
Joining us now is Nicey President Lynn Martin lind Good morning,
thanks for joining.
Speaker 7 (09:49):
Us, Thanks for having me.
Speaker 8 (09:50):
So.
Speaker 1 (09:50):
You told John.
Speaker 3 (09:51):
Leson myself in May that you saw quote unprecedented levels
of volume following the April second Liberation Day, but for
the IPO landscape, you were optimistic, but the timeline was
shifted out. Where are we now in that timeline in
that pipeline?
Speaker 7 (10:04):
Well, I think as a result of the successful deals
we've been able to bring to market, really starting in
that end of May timeframe, but most manifestly over the
last two weeks when we had seven IPOs, I think
it's fair to say that the markets are open for IPOs.
Speaker 6 (10:23):
Our markets open for all IPOs, though, d do we
still need to be selective among those that are being
brought in and they need to be tech companies for example,
or can we start to see some of the smaller
midcaps come back too.
Speaker 7 (10:35):
Yeah, we've seen a variety of sizes and companies across
different sectors come to market in the last few months.
UH Tech in particular, has, as you point out, had
a great reception in the market. You know, in the
last two weeks we saw Nils and IQ. We saw
McGrath Hill, we saw Figma as you just had the
screen up, and then a couple months ago we saw
(10:56):
a Circle come to market, also Hinge Health and Mountain,
so some really tech led companies, but mostly pretty much
all sectors.
Speaker 6 (11:07):
The market rate a bit of a split screen though,
in because you start to have some IPOs coming back,
and at the same time you have these private equity
players coming up with liquidity solutions that just allows companies
to be private for longer, be it secondary funds, be
it perpetual capital. And their argument is companies just don't
want to be public and we're giving the option not
to be longer term. Does that hinder IPOs?
Speaker 7 (11:28):
Well, I think what it means is that the companies
that come to market are better companies. You look at
the companies that have come to market, it's not the
first time that they've been in the news about an
IPO bo Look at Circle for example, they were talking
about going public back in twenty twenty one when they
came to market. Though they're a better company. They have
(11:50):
a more refined strategy, a more refined P and L,
a story for the investors that generates a tremendous amount
of excitement. And I think what you're seeing with the
reception of the companies that have come to market is
that pent up demand in the public markets, that pent
up excitement in the public markets for new issues to
(12:13):
come to market. It's something that I talk with long
only investors, something I talk with retail about how they
really want to see these new names, these growth companies
come to market to add to their portfolio.
Speaker 3 (12:26):
That pent up demand. Was it being held back because
of regulation in Washington?
Speaker 7 (12:30):
It was really being held back because of volatility and
uncertainty in markets. There've been a variety of events that
have occurred over the last three three and a half years, wars,
geopolitical uncertainty that have fueled that volatility. Now that there
is more certainty, more certainty around the geopolitical landscape, more
(12:55):
certainty around the market and the trajectory of the market,
that's why you're seeing these companies finally come to market.
Speaker 3 (13:02):
How has the change in regulatory leadership though the SEC
regulates the nicey, how has that potentially changed your business
going forward?
Speaker 7 (13:09):
We're very optimistic. We had a great relationship with the
past administration and the past SEC, but We're very excited.
Speaker 3 (13:16):
About blackinso's very different than Garrigance.
Speaker 7 (13:19):
He is he is, and we've had a long relationship
with Paul Atkins. This isn't Paul Akins' first time in
the SEC, and we had a very productive working relationship
with him. We've already had a very productive working relationship
in the short time that he's been chair, and a
lot of the modifications that he's looking to make I
(13:41):
think are going to benefit the public markets.
Speaker 6 (13:43):
So we have a moment where public market volatility has
started to edd But even so, you have the rebirth
of memestocks, and you have these weird things happening where
you have open Door, for example, on one day, can
account for ten percent of all equity trading volume. What
do you make of just the health of these markets
at this moment as some of that starts to bubble up.
Speaker 7 (14:01):
I think the markets are incredibly healthy. I mean, our
markets are the envy of the world. The breath, the depth,
the liquidity, the trade certainty. Any one day, though there
could be excitement about a different name. I think what
you're seeing is a lot of the pent up demand
looking for the new issues and new things to treat.
Speaker 6 (14:21):
It's very different though than twenty twenty one, where those
retail investors have had all the money to go.
Speaker 1 (14:26):
So when you look at that, you're like, Okay, this
is just.
Speaker 6 (14:28):
A temporary phenomenon, or do we just need to get
used to single names getting this wind sweep of various
excitement built up online and that's just the new normal
we live in.
Speaker 7 (14:37):
No, I really can't speak to what's driving a stock
any on any given day. Certainly the social media and
the conversation around stocks overall, I think is actually a
good thing. It means that people aren't interested in investing,
they're interested in adding to their portfolio. They're also interested
(14:59):
in diversifying their portfolio.
Speaker 1 (15:01):
Speaking of diversification.
Speaker 3 (15:02):
On Thursday, at and T says they're going to have
this dual listing and the icy in Texas.
Speaker 1 (15:06):
What's the business like in Texas.
Speaker 7 (15:08):
Yeah, Well, we're very supportive of all of the changes
that Governor Abbit has rolled out in the state of
Texas to really foster that pro growth environment. Since we
announced NYC Texas and launched the exchange, which was the
end of March this year, we've added twenty new listings
(15:28):
to the exchange. So we're very optimistic and grateful for
a governor abbit for really leading the way on pro
business atmosphere.
Speaker 1 (15:36):
Do you see more money leaving New York though?
Speaker 7 (15:39):
You know, I don't really, I don't know. I don't
think so. I think New York's always going to be
an important at the center for markets. But I think
it's interesting the pro business moves and then ultimately what
the pro business moves in Texas will lead to.
Speaker 1 (15:57):
On the federal level. More than anything, Lynn, thanks so
much for time.
Speaker 3 (16:00):
Thanks for having great insight, and I see President Lynn Martin.
Michelle Meyer of MasterCard Economics Institute writing, consumers are the
heartbeat of the economy and they are resilient.
Speaker 1 (16:19):
Michelle joins us.
Speaker 3 (16:20):
Now, so you say they're resilient, what kind of cracks Michelle,
and good morning, thanks for joining us. Do you think
the economy is seeing right now when it comes to
the consumer?
Speaker 1 (16:27):
Well, I think it goes back to.
Speaker 9 (16:28):
What we learned over the last few days on Friday
with the jobs report that clearly there has been an
certainty impact in the economy that has mattered for companies
when they think about the labor demand numbers. So the
slow down in job creation within the May, and the
Junie report looking distinctly different than we thought it was
in real time, shows that's something that uncertainty mattered, that
(16:49):
there probably was some pausing in terms of the pace
of job creation. But importantly, there's very little evidence of
firing happening, whether you look at the jobless claims now
or you look at the JOLT survey. And I think
for consumers, what that results in is a labor market
that is still supportive right, an unemployment rate of four
point two percent, wage growth that is still running above
(17:13):
underlying inflation, even with some of the tariff inflation impulses starting.
Speaker 1 (17:17):
To move in.
Speaker 9 (17:18):
So consumers are managing this, I think quite remarkably.
Speaker 6 (17:21):
And things like sales and the earnings we've seen look
really strong. But Andrew lapthorn Over at Softgen noted that
two thirds of the companies in the S and P
reported declining profit margins. In other words, for now, the
companies are eating the higher costs. If they turn around
and start to rise and raise costs, will the consumer
still be resilient.
Speaker 1 (17:39):
Well, I think it's.
Speaker 9 (17:40):
Happening, and it's happening slowly, And this is important to
keep in mind, which is that I think relative to
the initial expectations and the fear of terrists was that
it was going to impact the economy immediately and all
of a sudden, consumers won't be able to get items
or they won't be able to afford certain goods. And
the reality is that it's happening slowly. It's moving into
the economy. It's starting more on the supplier side than
(18:03):
the companies and into consumers. And if you look at
the last inflation report, it's starting to show in certain
categories a lot of the durable goods, discretionary goods, whether
you're looking at appliances or auto tires or even into apparel,
it's starting to show up. So I would argue that
consumers are ready starting to face some of those higher prices.
It's happening gradually, and it's happening uneven, which means that
(18:25):
consumers still have some choices in terms of how to
navigate this and move around some of these price shocks.
Speaker 6 (18:30):
In terms of the unevenness, it's also interesting to look
and see what the hottest parts of this economy are,
and it's hard to argue it's anything but tech and AI,
but these are the very companies that are firing on
a headline level and only hiring at the top echelons
where you get the most pay. When you look at
that trend, do you see what you're talking about, the uneveness.
Does it start to get exacerbated by some of these
(18:53):
tech moves.
Speaker 9 (18:54):
Well, I think the fact that you're seeing all this
investment focus on technology is actually really positive secular trend
that hopefully can help get us through some of this
sick legal adjustment that's happening as a result of tariffs.
But yes, to your point, what it also does is
it creates a lot of wealth in the economy. So
if you look at the equity market, we'll see what
results today. But the trend has clearly been very positive,
(19:16):
notwithstanding Friday, and therefore that's positive wealth gains, and those
positive wealth gains will filter into consumer spending amongst the
cohort that can realize those gains, that can invest and
can see that wealth creation.
Speaker 1 (19:29):
That's the upper achalance of society.
Speaker 3 (19:31):
Do you feel like we're going into a K shape
economy or we're just already in one?
Speaker 9 (19:35):
You know, that's been a conversation that's been on and
off for the past several years. And I think the
reality is that it's there's always an unevenness about any
business cycle, and I think when you consider the start
of this cycle coming out of the pandemic, it was
certainly one that was much more driven by lower income
consumers than we have seen in recent history because of
(19:55):
the amount of stimulus that pumped in, because of the
movement of labor market, red hot labor mark, very strong
wage growth, and that has shifted over the last two
years or so where lower income consumers aren't saying that
same wave of stimulus clearly, and wage growth has slowed
a bit more for that population than for others, and
the balance sheet is just frankly not going to be
(20:16):
a supportive We have a.
Speaker 3 (20:17):
Viewer writing in Loving to get your thoughts on real
PC turning negative in the first six months of twenty
twenty five. They say it's the first time we've seen
that since twenty ten, excluding of course the pandemic.
Speaker 9 (20:27):
Well, real PC turning negative I think we can debate,
but certainly there's been a slow down in measures of
real PC if you look at the GDP reports in
Q one and Q two, and that reflects what we
were just talking about in terms of higher prices. Right
the consumer has already started to see some of those
price increases.
Speaker 1 (20:43):
And what that does.
Speaker 9 (20:44):
It means that real spending starts to slow. We saw
it during the pandemic inflationary burst. The nominal economy was
running at extraordinarily high levels and the real economy was
much much slower because consumers and companies have to absorb
those higher prices. So when you have a price shock
today is a lot more muted than it was during
(21:05):
the post pandemic period, But the real economy has to
moderate in order to absorb some of those inflation camps.
Speaker 6 (21:13):
Michelle, you look at a lot of alternative data sources,
and right now we're in a moment where we're starting
to question the official data we're getting, not least of
which if we do get an appointment at the BOS,
which is blatantly political, if that does happen, would you
be prepared to lean in to those alternative data sources.
Does it change the inputs that you use to see
where we go from here?
Speaker 9 (21:33):
Well, I am a big, big advocate of many different
data sources. At the massacret Economics Institute, we're sitting on
one of the most amazing ones which is understanding the
consumer in real time by looking at consumer payments. So yes,
I think it's extremely important to rely on many, many
different sources and forms of data. The great thing about
(21:54):
as being an economist here in the US is that
we have a very long time series of data coming
out of the government, which has been an extraordinary support
for us in terms of how we think about modeling
the economy. But the economy is dynamic, the economy is shifting,
and therefore I think you have to be really mindful
of using a variety of different data sources. So trying
(22:14):
to see really that pulse of the consumer in particular
and how consumers are evolving their spending trends has been
a critical impet for US, and I think a real
distinguishing factor.
Speaker 3 (22:25):
With the president though firing the head of the BLS,
do you still put credibility in the job support going forward?
Speaker 1 (22:31):
I think you do.
Speaker 9 (22:32):
I mean, look, I think there's a huge staff of
economists at the BLS that are doing their.
Speaker 1 (22:37):
Josh doesn't really even touch the data until the very end.
Speaker 9 (22:40):
And they've been doing their job for decades and I
think that's hard to shift overnight. But they're contending with
the fact that the response rate has been declining for
surveys across all different types of government.
Speaker 1 (22:53):
Data, and that's a challenge.
Speaker 9 (22:54):
So I think continuing to adapt, continuing to find new methodologies,
new innovative ways to gather data, it will be really important.
Speaker 3 (23:01):
Michelle Meyer, thank you so much for your time this morning.
Of course, Michelle Meyer of the Massacard Economics Institute. Former
New York Fed President Bill Dudley, writing this morning, quote,
don't be fooled by the drama in terms of how
(23:21):
the Fed manages the economy. It's mostly a tempest in
a teapot. Bill joins us.
Speaker 1 (23:26):
Now, all right, Bill, I won't be distracted by all
the drama.
Speaker 3 (23:28):
But there's a lot of noise right now coming out
of Washington, DC when it comes to who potentially take
this role. Do you think this administration wants to put
in a shadow FED chair.
Speaker 4 (23:40):
I don't know if that's their intention or not.
Speaker 8 (23:42):
But obviously the next governor appointment that seemed to be
on a faster timeline than we thought will be important
because that person could end up being the next FED chair,
and so people pay a particular attention to who that
person is and what their views are.
Speaker 6 (23:56):
So in that case, And I know as you write,
Bill that you did see boers desire to succeed Powell
and Bowman's thank you to Trump for appointing her as
part of the reason behind their descents.
Speaker 1 (24:06):
Bill, if I can just push.
Speaker 6 (24:08):
You on that, because many people have looked at this
economy and said there are reasons for a cut, and
Friday vindicated that with weaker labor market data. Is there
an issue where we look at all these descents and
say they are just political or is there real evidence
that perhaps the Fed should be leaning towards a cut.
Speaker 4 (24:24):
Well, the FED is leaning towards a cut.
Speaker 8 (24:26):
If you go back and look at the June Summary
of Economic projections, everybody sees the path of race is
going downward.
Speaker 4 (24:32):
It's just a question of magnitude and timing.
Speaker 8 (24:34):
So the degree of disagreement with in the FED is actually,
I think dramatically overstated, because everybody thinks.
Speaker 4 (24:40):
The next direction of moves is down.
Speaker 8 (24:41):
Just a question of when to do it and how
to manage the inflation risk caused by the higher terrorists.
Speaker 6 (24:47):
So Bill, the direction of descent or the amount of
descent is overstated. So too is the ability for this
FMC to be swayed. What happens though, if the data
becomes less reliable if a more political figurehead is put
in at the BLS bill. You've been in the room
evaluating this data with colleagues. How does that change and
the FEDS evaluation of said data if changes are made
(25:09):
at the Bureau of Labor Statistics.
Speaker 8 (25:11):
Well, it depends on whether the change is made at
the Bureau Labor Sittays actually result in poor quality data
or not. Obviously, if the data is rigged, then the
Federal Reserve is going to have to go to other
sources of data. There's a lot more data available now
than there was in the past. You know, there's a
lot of data that you can scrape off the Internet,
for example.
Speaker 4 (25:29):
So I think that obviously we want.
Speaker 8 (25:30):
The BLS data to be excellent quality and trusted, and
that's very important, and.
Speaker 4 (25:35):
So we have to keep an eye on that.
Speaker 8 (25:37):
But the idea that the Fed would be sort of
unable to conduct mantrat policy because the BLS data was corrupt,
I don't think that's the case.
Speaker 3 (25:43):
Well, going to the BLS data on Friday now, the
average three month payroll gain went from one hundred and
fifty thousand before Friday is released to now just thirty
five thousand. Going back to those two dissenters, doesn't governor
Waller have a point the crack has already emerged.
Speaker 1 (25:58):
Is the FED going to be behind the curve?
Speaker 8 (26:01):
Well? I think the FED probably will be behind the
curve because the terroriffs creates so much uncertainty about what's
going to dominate the risk of inflation or the risk
of growth. Everyone said the terrorists are going to push
up prices and push down economic activity, and the questions
which is going to predominate. So the fact that the
FED might be late is because the arraft policies created
this tremendous uncertainty about which force is going to be dominant.
Speaker 3 (26:22):
J Powell really honed in on the unemployment rate last week,
talking about the fact that's the main number is going.
Speaker 1 (26:28):
To look at. We did see a tick up to
four point two percent.
Speaker 3 (26:31):
What do you think the line is for him where
the unemployment rate ticking to what would get him really uncomfortable?
Speaker 8 (26:38):
I think, you know, a couple more in tents would
definitely get him uncomfortable, because then you start to think
that the whole labor market was starting to give way,
and when that happens, it can be a self fulfilling
prophecy because it scares people. They pull back on their
own their spending, and that makes the labor market still weaker.
Speaker 4 (26:52):
The important part points that Paul.
Speaker 8 (26:53):
Made, though, is it's not about the payroll employment changes,
it's basically how that actually reflects in the unemploying rate.
Because what's basically happening this year is the growth rate
of labor demand has fallen, but the growth rate of
labor supply has also fallen dramatically because of deportations and
the crackdown and immigration. So both sides of the labor
market are less robust than there were before.
Speaker 6 (27:15):
And the jobs that were added Bill about seventy five
of them came from healthcare, the cyclical parts of the economy.
Really we're not adding jobs. The lack of breath in
Friday's data. Does that concern you at all?
Speaker 5 (27:27):
Well?
Speaker 4 (27:27):
I think.
Speaker 8 (27:28):
I mean, I'm worried that we're going to be in
a sort of stagflationary environment where we're going to have
at both higher prices and a weaker economy. And the
question is which one do you put more weight on.
I think the direction of rates is down. I think
the question is just, you know, what meeting does the
FED finally to see enough evidence to warrant a cut.
As I said in the piece that I published in
Biolberg Opinion, you know, there's not that much disagreement about
(27:49):
the FED.
Speaker 4 (27:49):
It's all about timing and magnitudes, not about direction.
Speaker 6 (27:53):
Well, what happens if Bill we have Adrinic Googler stepping down,
so that's certainly a Trump appointment, and then you get
Shairpowell who decides not to stay on as a governor
through twenty twenty eight. In total, you add to that
both Bowman and Waller. That means for Trump appointees on
the FLMC, does that an aggregate just mean at the
very margin a more doves shift to this FED?
Speaker 4 (28:15):
Oh? Absolutely?
Speaker 8 (28:16):
I mean I think you know, when it's a close
call in that kind of situation, the ties.
Speaker 4 (28:21):
Are going to go to the doves.
Speaker 8 (28:23):
But at the end of the day, the economy is
going to drive the story. You know, I think, you know,
the chairman can't take the FED wherever he or she wants.
It depends on how the economy is motivating. What's the
right thing to do in terms of monetary policy. The
chair has to convince the rest of the FOMC to
go along. Now, obviously, if you have four governors all
lined up on one side, that that gives the chair
(28:44):
quite a bit of momentum to get his or her way.
But you know, I think the feder Reserve presidents are
going to continue to vote their conscience in terms of
what's right for the for the macro economy.
Speaker 3 (28:54):
The markets this morning are rebounding off of the lows
on Friday, following the fact that everyone's starting to bake
in this idea of a September rate cup. But Bill,
what if we get a hot CPI print, what's going
to happen?
Speaker 7 (29:06):
Then?
Speaker 8 (29:07):
Well, I think it's too soon to say that we're
going to get a September rateco. I mean, we just
saw how the market for September has moved dramatically just
in the last week. When Paul made his remarks that
the press conference, people said, oh, they're not going to
cut in September, and then we got the week in
payroll and plumber report on Friday and everyone says, oh,
they are going to cut in September. So it's a
long time between now and September. You know, I think
(29:28):
the prospects are pretty good that the FED is going
to cut rates later this year. Whether it turns out
to be September or not really is going to turn
out to depend on the data bill.
Speaker 6 (29:36):
To what degree, could this just be a post Liberation
Day fallout the jobs data we've had over the past
three months and something that might rebound in August given
more certainty on which tariff levels are being set.
Speaker 8 (29:47):
I think you're making a good point that the terriffs
have caused people to sort of stand back in terms
of business hiring and business investment because they don't really
know what the landscape is. And as we get past
August first and get more clarity on what the tariff
packages are going to be country by country, that presumably
will make businesses more willing to move forward in terms
(30:10):
of their investment and hiring plans. So it certainly could
go that way, or it could go that the higher
terraffts are raising prices, that's crimping real income, and that's
affecting consumer spending, and that's leading to weakness and employment
that it's going to motivate the FED to cut rates.
Speaker 4 (30:23):
We still don't know which way, which direction is going
to predominate.
Speaker 1 (30:26):
What we do know, though, is we know most of
the rates.
Speaker 3 (30:28):
As a handful of countries potentially could get better deals
and better rates, but for the most part, we do
know the rates going forward and they're going to take
effect this Thursday. How much time do you think the
FED needs to see this work through the economy?
Speaker 8 (30:40):
Well, I think the FED would like to see, you know,
a lot of time, a lot more than six weeks
to the next FOMC meeting.
Speaker 4 (30:46):
I think they think it's probably going.
Speaker 8 (30:47):
To take six months to get to see the full
effects of the teriffs because it takes quite a bit
of time between the good landing on US shores and
it actually ending up being sold in a department store
and other retail establishment. So I think the FED thinks
it's going to be a slow process, And Paul basically
said that at his press conference last week.
Speaker 3 (31:06):
Former New York Fed President Bill Dudley, thank you so
much for your time this morning.
Speaker 2 (31:10):
This is the Bloomberg Surveillance podcast, bringing you the best
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Speaker 2 (00:11):
This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
with Lisa Bromwitz and a Marie Hortern. Join us each
day for insight from the best in markets, economics, and
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are live on Bloomberg Television weekday mornings from six to
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(00:33):
Bloomberg Terminal and the Bloomberg Business app.
Speaker 1 (00:36):
We'll begin this.
Speaker 3 (00:36):
Hour with stocks looking to bounce back after a week
payrolls report, fueled rate cut expectations and your d any
of your Danny research writing. Traders might be starting to
take profits before going on their August vacations. They may
also be betting that September could be a week month
for stocks.
Speaker 1 (00:52):
Ed joins us now, and let's start.
Speaker 3 (00:54):
With the growth picture and just your reaction to Friday's
labor market data, especially those massive downwards revisions. For you
right now, is it a cause of concern?
Speaker 4 (01:04):
Not?
Speaker 5 (01:05):
Really? Not the way the market took a dive, and
I'm happy to see that the market may very well
rebound today. The reality is we did have a lot
of uncertainty during May and June when we had these
big downward revisions. Honestly, it seems to me the downward
revisions actually make more sense given that if I was
(01:25):
an employer during May and June, I wouldn't have fired anybody.
But I wouldn't have hired anybody given all the uncertaintly
unleashed by what I call Trump's tariff turmoil. And so yeah,
all in all, those numbers didn't surprise me all that much,
with the benefit of hindsight obviously. And then of course
(01:46):
we did see that the labor supply, the labor force
has been kind of flatted down since the beginning of
the year. So this is a combination of weakness in
May related that may be temporarily related to the turmoil
on tariffs that should I think be abait over the
(02:08):
next few months. And at the same time we may
actually have a shortage of workers.
Speaker 3 (02:12):
Well, the President didn't like the jobs number on Friday,
and he fired the head of the Bureau of Labor Statistics.
Do you think that undercuts market confidence?
Speaker 5 (02:22):
Well, this is a very bad situation. The President in
my opinion, shouldn't have done that. I agree with what
your collie Danny just said, and that is he should
be throwing more money at the Bureau of Labor Statistics
that he can do a better job settling workers and
(02:43):
the unemployed to see what's really going on here. Firing
the commissioner it does raise some questions of the confidence
that people are going to have in the data, especially
if he puts in a loyalist as a statistician, which
he's likely to do.
Speaker 6 (02:59):
So what do you do then, ed, if you get
a loyalist put in as a top statistician there, do
we still trade on the data? Do you take it
more skeptically? Do you use private measures more? How will
it change how you interpret labor market data?
Speaker 5 (03:11):
Well? Yeah, I think right now there's a lot of
skepticism about the labor market data, the employment data, I
should say, because of what you mentioned before the fact
that response rates have gone down, and look, the economy
moves a lot faster these days, and I'm not sure
(03:32):
the statistical techniques that the BLS has move is rapidly.
So I would throw more money at him rather than
become partisan partisan about it. So all I'm saying is
that data was already suspect for other reasons. And we've all,
all of us economist types have looked at all the
employment data, both private and public. So I think nothing
(03:58):
dramatically changes in terms of the way the markets look
at data.
Speaker 6 (04:02):
Even so ed nothing dramatically changes. But Friday did demonstrate
a vulnerability in the market with that huge move in
the front end. You could even see what happened with
copper prices demonstrated a vulnerability.
Speaker 1 (04:13):
Given that we've had.
Speaker 6 (04:14):
This slow melt up to the summer, you're still bullish ed,
But are you concerned about some of these short term
blips that traders aren't properly hedged for.
Speaker 5 (04:23):
Well, you quoted me saying that a lot of traders,
a lot of investors are going on vacation. They certainly
don't want to be exposed to the volatility of the market,
at least not from a trading perspective. So I think
we're going to see a lot of that kind of
activity slow down. I think it already has slowed down.
Maybe it started that on Fridays. Some people said, you
(04:44):
know what I'm going to take. I'll be taking vacation
for the next week, two weeks. Let me just close
my books here. And then, of course there is a
seasonality issue. Septembers have a tendency to be a week months,
so I would miss prize if this market just kind
of chops around here in August and September, and maybe
(05:05):
we make some sort of low or bottom in October
for a year end rally.
Speaker 3 (05:11):
Good luck to anyone who's trying to take a vacation
with all these headlines coming out, and also this week
we have this new deadline when it comes to the
tariff rates on Thursday. Do you think the market is
ready to basically put the trade war behind them?
Speaker 5 (05:24):
I think the markets would love to put the trade
war behind them, and I really thought that by now
the President would really be sort of in the same camp,
because he's going to start focusing on the midterm elections
next year. He does love to talk at these large conventions,
these large rallies in sports stadiums, and he's going to
(05:47):
need to do that in order to shore up his
Republican Party during the midterm elections. And he's going to
really start to focus on just saying what has been
accomplished and avoid doing things that might backfire on the midterms.
So yeah, I think the other issue, of course, is
(06:08):
the courts are probably about to rule it. He doesn't
really have the legal authority to do what he's been doing.
I don't know if it's going to go all the
way up to the Supreme Court. The Appeals Court has
a love in judges, and if all I loved of
him rule that way, which is possible, the Supreme Court
may not take it up. So we may be entering
even a more volatile period with regards to what's going
(06:30):
on here on the tariff side.
Speaker 3 (06:31):
But you don't expect the terrors to go away, do you,
Because there are other tools they can use to enact them.
Speaker 5 (06:37):
There are other tools, but they're not as quick or
efficient as the Emergency Act that he called upon. That
the courts may rule he just doesn't have the power
to declare an emergency when there doesn't seem to be
an emergency. But again, I think he and the administration
(06:59):
may conclude that it's time to downplay the whole thing
and move on.
Speaker 6 (07:04):
What does that mean for corporate America ed Some of
these companies are just starting to wrap their heads around
what it needs for them, or you have the legend
of Amazon last week, who said, we just don't know
what's going to happen moving forward. Is there enough clarity
after Friday for corporations to move forward with things like
spending and hiring plans.
Speaker 5 (07:21):
I think we have to see what the courts rule
and how the administration responds to that. The reality is,
if we just take it at face value that the
President wants to basically achieve a fifteen percent tariff across
the board on everybody and raise something like four or
five hundred billion dollars, well, the corporate income tax raises
(07:42):
about six hundred billion dollars. In effect, the tariffs are
attack and there are direct tax on importers businesses, and
so it is a negative for corporate profitability. And again
we've heard some bad news out of GM and Ford
anticipate this, but other companies said, we just don't know
enough to really figure out what this is going to
(08:05):
cost us. So that's still a known unknown.
Speaker 3 (08:08):
But still a little bit more clarity in terms of
the bottom line rate for tariffs. We do have a
weakening jobs report on Friday. Do you think the Fed
is in position to cut in September?
Speaker 5 (08:19):
Well, the market certainly thought so on Friday, maybe today
there'll be a change of opinion. I think on Friday
we got the probability of a rate cut according to
the CME Fedwatch tracking tool, going up to a ninety
percent probability. Then over the weekend that you know, that
(08:42):
actually simmer down by the end of Friday down to
eighty percent. I wouldn't be surprised if there is no
rate cut on September because we still have a batch
of data up ahead here, particularly on the inflation front.
We are seeing that the tariffs are having an impact
on inflation. A lot of people saying, well, it's not there,
(09:03):
but the reality is, if you look at durable goods inflation,
durable goods prices typically fall. That's what they did before
the pandemic. Then they had that inflation spike, but then
they came right back and started falling again, and now
they're rising again, mostly because of the tariffs.
Speaker 3 (09:21):
ED thanks so much for your time this morning, to
great point at your Denny of your Denny research. IPOs
are making a comeback this summer, with the latest FIGMA
share surging more than two hundred and fifty percent in
(09:42):
its debut last week.
Speaker 1 (09:44):
So excited for this conversation.
Speaker 3 (09:45):
Joining us now is Nicey President Lynn Martin lind Good morning,
thanks for joining.
Speaker 7 (09:49):
Us, Thanks for having me.
Speaker 8 (09:50):
So.
Speaker 1 (09:50):
You told John.
Speaker 3 (09:51):
Leson myself in May that you saw quote unprecedented levels
of volume following the April second Liberation Day, but for
the IPO landscape, you were optimistic, but the timeline was
shifted out. Where are we now in that timeline in
that pipeline?
Speaker 7 (10:04):
Well, I think as a result of the successful deals
we've been able to bring to market, really starting in
that end of May timeframe, but most manifestly over the
last two weeks when we had seven IPOs, I think
it's fair to say that the markets are open for IPOs.
Speaker 6 (10:23):
Our markets open for all IPOs, though, d do we
still need to be selective among those that are being
brought in and they need to be tech companies for example,
or can we start to see some of the smaller
midcaps come back too.
Speaker 7 (10:35):
Yeah, we've seen a variety of sizes and companies across
different sectors come to market in the last few months.
UH Tech in particular, has, as you point out, had
a great reception in the market. You know, in the
last two weeks we saw Nils and IQ. We saw
McGrath Hill, we saw Figma as you just had the
screen up, and then a couple months ago we saw
(10:56):
a Circle come to market, also Hinge Health and Mountain,
so some really tech led companies, but mostly pretty much
all sectors.
Speaker 6 (11:07):
The market rate a bit of a split screen though,
in because you start to have some IPOs coming back,
and at the same time you have these private equity
players coming up with liquidity solutions that just allows companies
to be private for longer, be it secondary funds, be
it perpetual capital. And their argument is companies just don't
want to be public and we're giving the option not
to be longer term. Does that hinder IPOs?
Speaker 7 (11:28):
Well, I think what it means is that the companies
that come to market are better companies. You look at
the companies that have come to market, it's not the
first time that they've been in the news about an
IPO bo Look at Circle for example, they were talking
about going public back in twenty twenty one when they
came to market. Though they're a better company. They have
(11:50):
a more refined strategy, a more refined P and L,
a story for the investors that generates a tremendous amount
of excitement. And I think what you're seeing with the
reception of the companies that have come to market is
that pent up demand in the public markets, that pent
up excitement in the public markets for new issues to
(12:13):
come to market. It's something that I talk with long
only investors, something I talk with retail about how they
really want to see these new names, these growth companies
come to market to add to their portfolio.
Speaker 3 (12:26):
That pent up demand. Was it being held back because
of regulation in Washington?
Speaker 7 (12:30):
It was really being held back because of volatility and
uncertainty in markets. There've been a variety of events that
have occurred over the last three three and a half years, wars,
geopolitical uncertainty that have fueled that volatility. Now that there
is more certainty, more certainty around the geopolitical landscape, more
(12:55):
certainty around the market and the trajectory of the market,
that's why you're seeing these companies finally come to market.
Speaker 3 (13:02):
How has the change in regulatory leadership though the SEC
regulates the nicey, how has that potentially changed your business
going forward?
Speaker 7 (13:09):
We're very optimistic. We had a great relationship with the
past administration and the past SEC, but We're very excited.
Speaker 3 (13:16):
About blackinso's very different than Garrigance.
Speaker 7 (13:19):
He is he is, and we've had a long relationship
with Paul Atkins. This isn't Paul Akins' first time in
the SEC, and we had a very productive working relationship
with him. We've already had a very productive working relationship
in the short time that he's been chair, and a
lot of the modifications that he's looking to make I
(13:41):
think are going to benefit the public markets.
Speaker 6 (13:43):
So we have a moment where public market volatility has
started to edd But even so, you have the rebirth
of memestocks, and you have these weird things happening where
you have open Door, for example, on one day, can
account for ten percent of all equity trading volume. What
do you make of just the health of these markets
at this moment as some of that starts to bubble up.
Speaker 7 (14:01):
I think the markets are incredibly healthy. I mean, our
markets are the envy of the world. The breath, the depth,
the liquidity, the trade certainty. Any one day, though there
could be excitement about a different name. I think what
you're seeing is a lot of the pent up demand
looking for the new issues and new things to treat.
Speaker 6 (14:21):
It's very different though than twenty twenty one, where those
retail investors have had all the money to go.
Speaker 1 (14:26):
So when you look at that, you're like, Okay, this
is just.
Speaker 6 (14:28):
A temporary phenomenon, or do we just need to get
used to single names getting this wind sweep of various
excitement built up online and that's just the new normal
we live in.
Speaker 7 (14:37):
No, I really can't speak to what's driving a stock
any on any given day. Certainly the social media and
the conversation around stocks overall, I think is actually a
good thing. It means that people aren't interested in investing,
they're interested in adding to their portfolio. They're also interested
(14:59):
in diversifying their portfolio.
Speaker 1 (15:01):
Speaking of diversification.
Speaker 3 (15:02):
On Thursday, at and T says they're going to have
this dual listing and the icy in Texas.
Speaker 1 (15:06):
What's the business like in Texas.
Speaker 7 (15:08):
Yeah, Well, we're very supportive of all of the changes
that Governor Abbit has rolled out in the state of
Texas to really foster that pro growth environment. Since we
announced NYC Texas and launched the exchange, which was the
end of March this year, we've added twenty new listings
(15:28):
to the exchange. So we're very optimistic and grateful for
a governor abbit for really leading the way on pro
business atmosphere.
Speaker 1 (15:36):
Do you see more money leaving New York though?
Speaker 7 (15:39):
You know, I don't really, I don't know. I don't
think so. I think New York's always going to be
an important at the center for markets. But I think
it's interesting the pro business moves and then ultimately what
the pro business moves in Texas will lead to.
Speaker 1 (15:57):
On the federal level. More than anything, Lynn, thanks so
much for time.
Speaker 3 (16:00):
Thanks for having great insight, and I see President Lynn Martin.
Michelle Meyer of MasterCard Economics Institute writing, consumers are the
heartbeat of the economy and they are resilient.
Speaker 1 (16:19):
Michelle joins us.
Speaker 3 (16:20):
Now, so you say they're resilient, what kind of cracks Michelle,
and good morning, thanks for joining us. Do you think
the economy is seeing right now when it comes to
the consumer?
Speaker 1 (16:27):
Well, I think it goes back to.
Speaker 9 (16:28):
What we learned over the last few days on Friday
with the jobs report that clearly there has been an
certainty impact in the economy that has mattered for companies
when they think about the labor demand numbers. So the
slow down in job creation within the May, and the
Junie report looking distinctly different than we thought it was
in real time, shows that's something that uncertainty mattered, that
(16:49):
there probably was some pausing in terms of the pace
of job creation. But importantly, there's very little evidence of
firing happening, whether you look at the jobless claims now
or you look at the JOLT survey. And I think
for consumers, what that results in is a labor market
that is still supportive right, an unemployment rate of four
point two percent, wage growth that is still running above
(17:13):
underlying inflation, even with some of the tariff inflation impulses starting.
Speaker 1 (17:17):
To move in.
Speaker 9 (17:18):
So consumers are managing this, I think quite remarkably.
Speaker 6 (17:21):
And things like sales and the earnings we've seen look
really strong. But Andrew lapthorn Over at Softgen noted that
two thirds of the companies in the S and P
reported declining profit margins. In other words, for now, the
companies are eating the higher costs. If they turn around
and start to rise and raise costs, will the consumer
still be resilient.
Speaker 1 (17:39):
Well, I think it's.
Speaker 9 (17:40):
Happening, and it's happening slowly, And this is important to
keep in mind, which is that I think relative to
the initial expectations and the fear of terrists was that
it was going to impact the economy immediately and all
of a sudden, consumers won't be able to get items
or they won't be able to afford certain goods. And
the reality is that it's happening slowly. It's moving into
the economy. It's starting more on the supplier side than
(18:03):
the companies and into consumers. And if you look at
the last inflation report, it's starting to show in certain
categories a lot of the durable goods, discretionary goods, whether
you're looking at appliances or auto tires or even into apparel,
it's starting to show up. So I would argue that
consumers are ready starting to face some of those higher prices.
It's happening gradually, and it's happening uneven, which means that
(18:25):
consumers still have some choices in terms of how to
navigate this and move around some of these price shocks.
Speaker 6 (18:30):
In terms of the unevenness, it's also interesting to look
and see what the hottest parts of this economy are,
and it's hard to argue it's anything but tech and AI,
but these are the very companies that are firing on
a headline level and only hiring at the top echelons
where you get the most pay. When you look at
that trend, do you see what you're talking about, the uneveness.
Does it start to get exacerbated by some of these
(18:53):
tech moves.
Speaker 9 (18:54):
Well, I think the fact that you're seeing all this
investment focus on technology is actually really positive secular trend
that hopefully can help get us through some of this
sick legal adjustment that's happening as a result of tariffs.
But yes, to your point, what it also does is
it creates a lot of wealth in the economy. So
if you look at the equity market, we'll see what
results today. But the trend has clearly been very positive,
(19:16):
notwithstanding Friday, and therefore that's positive wealth gains, and those
positive wealth gains will filter into consumer spending amongst the
cohort that can realize those gains, that can invest and
can see that wealth creation.
Speaker 1 (19:29):
That's the upper achalance of society.
Speaker 3 (19:31):
Do you feel like we're going into a K shape
economy or we're just already in one?
Speaker 9 (19:35):
You know, that's been a conversation that's been on and
off for the past several years. And I think the
reality is that it's there's always an unevenness about any
business cycle, and I think when you consider the start
of this cycle coming out of the pandemic, it was
certainly one that was much more driven by lower income
consumers than we have seen in recent history because of
(19:55):
the amount of stimulus that pumped in, because of the
movement of labor market, red hot labor mark, very strong
wage growth, and that has shifted over the last two
years or so where lower income consumers aren't saying that
same wave of stimulus clearly, and wage growth has slowed
a bit more for that population than for others, and
the balance sheet is just frankly not going to be
(20:16):
a supportive We have a.
Speaker 3 (20:17):
Viewer writing in Loving to get your thoughts on real
PC turning negative in the first six months of twenty
twenty five. They say it's the first time we've seen
that since twenty ten, excluding of course the pandemic.
Speaker 9 (20:27):
Well, real PC turning negative I think we can debate,
but certainly there's been a slow down in measures of
real PC if you look at the GDP reports in
Q one and Q two, and that reflects what we
were just talking about in terms of higher prices. Right
the consumer has already started to see some of those
price increases.
Speaker 1 (20:43):
And what that does.
Speaker 9 (20:44):
It means that real spending starts to slow. We saw
it during the pandemic inflationary burst. The nominal economy was
running at extraordinarily high levels and the real economy was
much much slower because consumers and companies have to absorb
those higher prices. So when you have a price shock
today is a lot more muted than it was during
(21:05):
the post pandemic period, But the real economy has to
moderate in order to absorb some of those inflation camps.
Speaker 6 (21:13):
Michelle, you look at a lot of alternative data sources,
and right now we're in a moment where we're starting
to question the official data we're getting, not least of
which if we do get an appointment at the BOS,
which is blatantly political, if that does happen, would you
be prepared to lean in to those alternative data sources.
Does it change the inputs that you use to see
where we go from here?
Speaker 9 (21:33):
Well, I am a big, big advocate of many different
data sources. At the massacret Economics Institute, we're sitting on
one of the most amazing ones which is understanding the
consumer in real time by looking at consumer payments. So yes,
I think it's extremely important to rely on many, many
different sources and forms of data. The great thing about
(21:54):
as being an economist here in the US is that
we have a very long time series of data coming
out of the government, which has been an extraordinary support
for us in terms of how we think about modeling
the economy. But the economy is dynamic, the economy is shifting,
and therefore I think you have to be really mindful
of using a variety of different data sources. So trying
(22:14):
to see really that pulse of the consumer in particular
and how consumers are evolving their spending trends has been
a critical impet for US, and I think a real
distinguishing factor.
Speaker 3 (22:25):
With the president though firing the head of the BLS,
do you still put credibility in the job support going forward?
Speaker 1 (22:31):
I think you do.
Speaker 9 (22:32):
I mean, look, I think there's a huge staff of
economists at the BLS that are doing their.
Speaker 1 (22:37):
Josh doesn't really even touch the data until the very end.
Speaker 9 (22:40):
And they've been doing their job for decades and I
think that's hard to shift overnight. But they're contending with
the fact that the response rate has been declining for
surveys across all different types of government.
Speaker 1 (22:53):
Data, and that's a challenge.
Speaker 9 (22:54):
So I think continuing to adapt, continuing to find new methodologies,
new innovative ways to gather data, it will be really important.
Speaker 3 (23:01):
Michelle Meyer, thank you so much for your time this morning.
Of course, Michelle Meyer of the Massacard Economics Institute. Former
New York Fed President Bill Dudley, writing this morning, quote,
don't be fooled by the drama in terms of how
(23:21):
the Fed manages the economy. It's mostly a tempest in
a teapot. Bill joins us.
Speaker 1 (23:26):
Now, all right, Bill, I won't be distracted by all
the drama.
Speaker 3 (23:28):
But there's a lot of noise right now coming out
of Washington, DC when it comes to who potentially take
this role. Do you think this administration wants to put
in a shadow FED chair.
Speaker 4 (23:40):
I don't know if that's their intention or not.
Speaker 8 (23:42):
But obviously the next governor appointment that seemed to be
on a faster timeline than we thought will be important
because that person could end up being the next FED chair,
and so people pay a particular attention to who that
person is and what their views are.
Speaker 6 (23:56):
So in that case, And I know as you write,
Bill that you did see boers desire to succeed Powell
and Bowman's thank you to Trump for appointing her as
part of the reason behind their descents.
Speaker 1 (24:06):
Bill, if I can just push.
Speaker 6 (24:08):
You on that, because many people have looked at this
economy and said there are reasons for a cut, and
Friday vindicated that with weaker labor market data. Is there
an issue where we look at all these descents and
say they are just political or is there real evidence
that perhaps the Fed should be leaning towards a cut.
Speaker 4 (24:24):
Well, the FED is leaning towards a cut.
Speaker 8 (24:26):
If you go back and look at the June Summary
of Economic projections, everybody sees the path of race is
going downward.
Speaker 4 (24:32):
It's just a question of magnitude and timing.
Speaker 8 (24:34):
So the degree of disagreement with in the FED is actually,
I think dramatically overstated, because everybody thinks.
Speaker 4 (24:40):
The next direction of moves is down.
Speaker 8 (24:41):
Just a question of when to do it and how
to manage the inflation risk caused by the higher terrorists.
Speaker 6 (24:47):
So Bill, the direction of descent or the amount of
descent is overstated. So too is the ability for this
FMC to be swayed. What happens though, if the data
becomes less reliable if a more political figurehead is put
in at the BLS bill. You've been in the room
evaluating this data with colleagues. How does that change and
the FEDS evaluation of said data if changes are made
(25:09):
at the Bureau of Labor Statistics.
Speaker 8 (25:11):
Well, it depends on whether the change is made at
the Bureau Labor Sittays actually result in poor quality data
or not. Obviously, if the data is rigged, then the
Federal Reserve is going to have to go to other
sources of data. There's a lot more data available now
than there was in the past. You know, there's a
lot of data that you can scrape off the Internet,
for example.
Speaker 4 (25:29):
So I think that obviously we want.
Speaker 8 (25:30):
The BLS data to be excellent quality and trusted, and
that's very important, and.
Speaker 4 (25:35):
So we have to keep an eye on that.
Speaker 8 (25:37):
But the idea that the Fed would be sort of
unable to conduct mantrat policy because the BLS data was corrupt,
I don't think that's the case.
Speaker 3 (25:43):
Well, going to the BLS data on Friday now, the
average three month payroll gain went from one hundred and
fifty thousand before Friday is released to now just thirty
five thousand. Going back to those two dissenters, doesn't governor
Waller have a point the crack has already emerged.
Speaker 1 (25:58):
Is the FED going to be behind the curve?
Speaker 8 (26:01):
Well? I think the FED probably will be behind the
curve because the terroriffs creates so much uncertainty about what's
going to dominate the risk of inflation or the risk
of growth. Everyone said the terrorists are going to push
up prices and push down economic activity, and the questions
which is going to predominate. So the fact that the
FED might be late is because the arraft policies created
this tremendous uncertainty about which force is going to be dominant.
Speaker 3 (26:22):
J Powell really honed in on the unemployment rate last week,
talking about the fact that's the main number is going.
Speaker 1 (26:28):
To look at. We did see a tick up to
four point two percent.
Speaker 3 (26:31):
What do you think the line is for him where
the unemployment rate ticking to what would get him really uncomfortable?
Speaker 8 (26:38):
I think, you know, a couple more in tents would
definitely get him uncomfortable, because then you start to think
that the whole labor market was starting to give way,
and when that happens, it can be a self fulfilling
prophecy because it scares people. They pull back on their
own their spending, and that makes the labor market still weaker.
Speaker 4 (26:52):
The important part points that Paul.
Speaker 8 (26:53):
Made, though, is it's not about the payroll employment changes,
it's basically how that actually reflects in the unemploying rate.
Because what's basically happening this year is the growth rate
of labor demand has fallen, but the growth rate of
labor supply has also fallen dramatically because of deportations and
the crackdown and immigration. So both sides of the labor
market are less robust than there were before.
Speaker 6 (27:15):
And the jobs that were added Bill about seventy five
of them came from healthcare, the cyclical parts of the economy.
Really we're not adding jobs. The lack of breath in
Friday's data. Does that concern you at all?
Speaker 5 (27:27):
Well?
Speaker 4 (27:27):
I think.
Speaker 8 (27:28):
I mean, I'm worried that we're going to be in
a sort of stagflationary environment where we're going to have
at both higher prices and a weaker economy. And the
question is which one do you put more weight on.
I think the direction of rates is down. I think
the question is just, you know, what meeting does the
FED finally to see enough evidence to warrant a cut.
As I said in the piece that I published in
Biolberg Opinion, you know, there's not that much disagreement about
(27:49):
the FED.
Speaker 4 (27:49):
It's all about timing and magnitudes, not about direction.
Speaker 6 (27:53):
Well, what happens if Bill we have Adrinic Googler stepping down,
so that's certainly a Trump appointment, and then you get
Shairpowell who decides not to stay on as a governor
through twenty twenty eight. In total, you add to that
both Bowman and Waller. That means for Trump appointees on
the FLMC, does that an aggregate just mean at the
very margin a more doves shift to this FED?
Speaker 4 (28:15):
Oh? Absolutely?
Speaker 8 (28:16):
I mean I think you know, when it's a close
call in that kind of situation, the ties.
Speaker 4 (28:21):
Are going to go to the doves.
Speaker 8 (28:23):
But at the end of the day, the economy is
going to drive the story. You know, I think, you know,
the chairman can't take the FED wherever he or she wants.
It depends on how the economy is motivating. What's the
right thing to do in terms of monetary policy. The
chair has to convince the rest of the FOMC to
go along. Now, obviously, if you have four governors all
lined up on one side, that that gives the chair
(28:44):
quite a bit of momentum to get his or her way.
But you know, I think the feder Reserve presidents are
going to continue to vote their conscience in terms of
what's right for the for the macro economy.
Speaker 3 (28:54):
The markets this morning are rebounding off of the lows
on Friday, following the fact that everyone's starting to bake
in this idea of a September rate cup. But Bill,
what if we get a hot CPI print, what's going
to happen?
Speaker 7 (29:06):
Then?
Speaker 8 (29:07):
Well, I think it's too soon to say that we're
going to get a September rateco. I mean, we just
saw how the market for September has moved dramatically just
in the last week. When Paul made his remarks that
the press conference, people said, oh, they're not going to
cut in September, and then we got the week in
payroll and plumber report on Friday and everyone says, oh,
they are going to cut in September. So it's a
long time between now and September. You know, I think
(29:28):
the prospects are pretty good that the FED is going
to cut rates later this year. Whether it turns out
to be September or not really is going to turn
out to depend on the data bill.
Speaker 6 (29:36):
To what degree, could this just be a post Liberation
Day fallout the jobs data we've had over the past
three months and something that might rebound in August given
more certainty on which tariff levels are being set.
Speaker 8 (29:47):
I think you're making a good point that the terriffs
have caused people to sort of stand back in terms
of business hiring and business investment because they don't really
know what the landscape is. And as we get past
August first and get more clarity on what the tariff
packages are going to be country by country, that presumably
will make businesses more willing to move forward in terms
(30:10):
of their investment and hiring plans. So it certainly could
go that way, or it could go that the higher
terraffts are raising prices, that's crimping real income, and that's
affecting consumer spending, and that's leading to weakness and employment
that it's going to motivate the FED to cut rates.
Speaker 4 (30:23):
We still don't know which way, which direction is going
to predominate.
Speaker 1 (30:26):
What we do know, though, is we know most of
the rates.
Speaker 3 (30:28):
As a handful of countries potentially could get better deals
and better rates, but for the most part, we do
know the rates going forward and they're going to take
effect this Thursday. How much time do you think the
FED needs to see this work through the economy?
Speaker 8 (30:40):
Well, I think the FED would like to see, you know,
a lot of time, a lot more than six weeks
to the next FOMC meeting.
Speaker 4 (30:46):
I think they think it's probably going.
Speaker 8 (30:47):
To take six months to get to see the full
effects of the teriffs because it takes quite a bit
of time between the good landing on US shores and
it actually ending up being sold in a department store
and other retail establishment. So I think the FED thinks
it's going to be a slow process, And Paul basically
said that at his press conference last week.
Speaker 3 (31:06):
Former New York Fed President Bill Dudley, thank you so
much for your time this morning.
Speaker 2 (31:10):
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